For the reasons described below, we are returning to you for reconsideration
a draft proposed rule from the Department of Transportation's (DOT)
Research and Special Programs Administration entitled, "Hazardous
Materials: Safety Requirements for External Product Piping on Cargo
Tanks Transporting Flammable Liquid," submitted to the Office of
Management and Budget (OMB) under Executive Order (E.O.) No. 12866
on April 26, 2001. Our staff is willing and prepared to work with
DOT on the issues identified below so that a revised package can
be resubmitted to OMB in a timely fashion.

This proposed rule would amend DOT's Hazardous Materials Regulations
to prohibit flammable liquids from being transported in unprotected
product piping ("wetlines") on DOT specification cargo tank motor
vehicles. DOT estimates that to comply with this requirement over
a 5-year period, over 28,000 cargo tanks will need to be retrofitted
and over 7,600 newly constructed cargo tanks will be installed with
a short-loading-lines system. DOT further estimates that the costs
of this rule will be $63.3 million and benefits will be $68.2 million
to $106.7 million (discounted present value over 30 years). These
monetized costs reflect compliance costs, and monetized benefits
represent an average of 1.5 fatalities/year and 0.25 injuries/year
reduced over a 30-year period (1.62 fatalities/year and 0.25/ injuries/year
when fully implemented after phase-in period) and $1 - $5 million
per year in avoided costs of highway closures, evacuations, and
environmental damage.

In May 1998, the National Transportation Safety Board (NTSB) issued
a report on the collision of a tractor/cargo tank semitrailer and
a passenger vehicle and subsequent fire that occurred in Yonkers,
New York on October 9, 1997. This report recommended that the Secretary
of Transportation prohibit the carrying of hazardous materials in
external piping of cargo tanks, such as loading lines, that may
be vulnerable to failure in an accident. We have studied this NTSB
report and believe that NTSB has identified a practice that does
increase the severity of accidents involving cargo tanks, though
infrequent, when they occur. We believe the practice does raise
a real safety concern and is worthy of attention. However, we do
have some concerns regarding how DOT is proposing to address these
safety risks. In particular, we are concerned about the safety risks
and other costs associated with the retrofitting of these cargo
tanks, and believe that these issues suggest that DOT seriously
consider applying this proposed rule only to new cargo tanks. This
concern and others are described in more detail below.

First, we are concerned that the retrofitting of cargo tanks that
this regulation requires may increase the risks of injury and fatality
to workers who must perform this work. In a recently issued proposed
rule (July 3, 2001, Federal Register Volume 66. No. 128),
DOT itself states that up to 10 fatalities a year may occur due
to work on DOT specification cargo tanks. This estimate was based
upon anecdotal evidence gathered by the Federal Motor Carrier Safety
Administration (FMCSA). Upon OMB inquiry into this matter, DOT discovered
that this FMCSA estimate was based on an anecdotal study that discovered
10 deaths in a three to four year period around the mid-1990's.
Subsequently, DOT researched the accident database of U.S. Department
of Labor's Occupational Safety and Health Administration (OSHA)
and, based on that source of data, estimated that possibly two to
three fatalities per year occurred between 1985 and 1997 as a result
of repair work performed on cargo tanks.

We think these estimates of fatalities resulting from repair work
on cargo tanks raise important issues of risk-risk tradeoffs for
this rule. In response to OMB questions on this matter, DOT has
stated that the risk to workers associated with repair work on cargo
tanks is (a) as a result of non-compliance with existing laws and
regulations, and (b) small in the case of the retrofits required
in this rule, since this work will be done when the tanks are brought
in for hydrostatic testing, at which time the cargo tank is emptied
of hazardous liquid and filled with water (which reduces the likelihood
of accidents). However, consistent with OMB guidance, agencies need
to take into account the extent of compliance with existing laws
and regulations when estimating the costs and benefits of rules
(and we would note that it is very likely that cargo tank accidents
would not occur at all if all drivers followed existing traffic
laws and regulations). Further, as a matter of practice workers
would perform these retrofits first-prior to the hydrostatic testing-since
hydrostatic testing is required to be performed after such modifications
of cargo tanks.

We recognize that the risks associated with this repair work are
short-term in nature, as the retrofits will be performed only once
over a 5 year period, and that the magnitude of these risks may
not be significant. However, the lifetime risks associated with
wetlines accidents is also small, and as such we need to take seriously--and
try to avoid--the possibility that we would merely transfer the
risks of one activity to another through this regulation.

In short, our primary concern with this rule is that it may actually
increase fatalities and injuries. DOT estimates that this rule could
save 1.5 lives and reduce 0.25 injuries per year over the next 30
years, but this does not consider a possible increase in fatalities
and injuries due to the hazardous nature of performing retrofits
on cargo tanks that transport flammable liquids. Similar repair
work in the past has resulted in perhaps two to three deaths per
year, and an as yet unestimated number of injuries. Hence, we believe
DOT needs to more fully examine the best reasonably obtainable information
on the consequences of this regulation, as is required by Section
1, paragraph (b)(7) in Executive Order (E.O.) 12866. In compliance
with this E.O., DOT should estimate what additional risks (in terms
of both fatalities and injuries) may be imposed upon workers as
a result of retrofitting cargo tanks under this rule.

Second, and related to the issue raised above, we believe that analysis
of the costs and benefits of this rule suggests that DOT propose
a regulatory alternative that applies only to new cargo tanks and
does not require a retrofit of existing tanks. We believe such a
regulatory alternative is more likely than DOT's current proposal
to maximize net benefits, as is required by Section 1 paragraph
(a) in E.O. 12866. DOT's own analysis shows that the range of net
benefits is higher under an alternative that would apply this regulatory
standard only to new cargo tanks and cargo tanks less than 15 years
old. DOT's analysis estimates net benefits of this alternative to
be $7.9 million - $44.6 million over 30 years, while the net benefits
of DOT's proposed alternative are estimated to be $4.9 - $43.4 over
30 years. This analysis also shows that by requiring a short-loading
lines system only on newly constructed cargo tanks, costs can be
reduced by over 50% (from $63.3 million to $29.3 million). DOT estimates
that the net benefits of applying this standard only to new tanks
could be higher (at $6.6 million - $26.9 million over 30
years) than under their draft proposed rule. Further, we believe
DOT needs to more fully consider the incremental cost-effectiveness
of these retrofits on cargo tanks, as concerns have been raised
that DOT has not adequately accounted for the full costs of these
retrofits. In taking into account the risks imposed by retrofitting
(as discussed in the above paragraphs), concerns about the higher
financial costs of retrofitting, as well as other concerns about
DOT's current benefits estimates (discussed below), it seems quite
likely that the alternative of imposing this requirement only on
new cargo tanks will provide greater net benefits at all endpoints
as compared to DOT's current preferred regulatory option.

Third, we would encourage DOT to more fully examine and consider,
based on the best reasonably obtainable information, whether the
fatalities or injuries associated with past accidents with cargo
tanks resulted from the accidents themselves or from explosions
resulting from the release of a flammable liquid. It may be that
these injuries and fatalities would not be avoided by a rule addressing
wetlines. In fact, of the six fatalities that occurred from 1996
- 2000 as a result of wetlines related accidents, DOT acknowledges
that two of these fatalities may have been caused by the accident
itself. However, DOT makes no adjustment for this possibility in
its benefits estimates, but rather extrapolates the future benefits
of this rule based on the assumption that all of these deaths occurred
as a result of a fire/explosion from the release of a flammable
liquid from the wetlines.

Finally, we believe other aspects of DOT's analysis need also be
more fully examined to allow for a reasoned determination regarding
whether the benefits of this regulation justify the costs, which
is required by Section 1, paragraph (b)(6) in E.O. 12866. For example,
we're concerned that DOT is using a benefits estimation methodology
that may be appropriate to produce an initial rough estimate of
the potential benefits of broad regulatory strategies, but needs
to be more refined if the goal is to estimate the expected benefits
of a particular rule. Specifically, DOT estimates the potential
benefits of this rule by extrapolating the number of injuries and
fatalities from past experience and then multiplying this result
by 1.5. When DOT used this same approach in a preliminary analysis
of this rule, the agency acknowledged that this might well overstate
the risks, but justified this methodology in the preliminary analysis
by stating, "...since the purpose of this analysis is to serve as
a first screen for possible rulemaking or other actions, it is appropriate
to use high estimates." However, DOT uses this same approach in
its analysis of the current draft wetlines rule, with no explanation
regarding why an overstatement of risk is still appropriate in this
context. In addition, we would note that if DOT considered fatalities
that occurred from wetlines related accidents starting in the year
1990 (the starting year that DOT used in its preliminary assessment
of this rule which concluded that the costs of this rule likely
exceeded the benefits), the fatality rate that occurred in the past
would be reduced to 0.72/year.

Due to the concerns listed above, we are returning this rule for
your reconsideration. We are aware that NTSB has expressed concern
that RSPA has been slow to act on NTSB's recommendations and thus
we urge RSPA to resolve this matter as soon as possible. I believe
we will be able to quickly resolve these issues through my staff
continuing to work with the DOT and RSPA policy officials and engineers
who are currently working on this rule, as well as DOT/RSPA analysts
with appropriate economic expertise. My staff is available for further
discussion on this, and looks forward to working with you in order
to ensure that the requirements of Executive Order 12866 are fully
met.

Sincerely,

/s/

John D. Graham
Administrator
Office of Information and Regulatory Affairs